Kalshi Tax Guide 2026: Tax Documents, Section 1256, and How to Report

What Kalshi reports to the IRS

Kalshi is a CFTC Designated Contract Market (DCM), designated in 2020; in January 2025 the CFTC modified its order of designation to permit intermediated trading. That regulatory status does not mean your trading results are reported to the IRS: according to the Kalshi Help Center, Kalshi does not issue a 1099 for event-contract profits. It provides a monthly profit-and-loss statement (Account → Tax Info) and issues Form 1099-INT for interest and Form 1099-MISC for credits and rewards above IRS thresholds.

Because no information return reports your event-contract results, you self-report them. The Kalshi profit-and-loss statement is the starting record: it is calculated on a FIFO basis and includes fees. Kalshi notes that its tax documentation is not tax advice.

Kalshi is not a casino or sportsbook, and Form W-2G is not among the tax documents it lists. How you characterize your results still matters, for three reasons:

• Capital-gains or §1256 treatment is generally more favorable than gambling-winnings treatment for profitable traders.
• Losses are usable against gains under capital-loss rules — gambling losses are only deductible as an itemized deduction up to the amount of winnings, and are lost entirely if you take the standard deduction.
• Net losses can carry forward (and, in the §1256 case, carry back) rather than being trapped in the year realized.

What tax documents Kalshi sends

Kalshi sends no 1099 for event-contract profits. Its Help Center lists a profit-and-loss statement (Account → Tax Info), updated monthly, calculated on a FIFO basis and including fees — the record you build your own reporting from.

Above IRS thresholds, Kalshi also issues Form 1099-INT for the interest (APY) it pays on cash and open positions, and Form 1099-MISC for credits and rewards. The list is completed by a Form 1099-B that covers only proceeds from crypto transfers and a Form 1099-DA for digital-asset reporting from ZeroHash, each also only above IRS thresholds. Below the thresholds, you are still legally responsible for reporting the income.

Section 1256 and the 60/40 rule

Section 1256 of the Internal Revenue Code governs "regulated futures contracts," non-equity options, and certain other exchange-traded instruments. Section 1256 contracts enjoy two special tax rules that are extremely favorable for active traders:

• The 60/40 rule. Regardless of how long you held the contract — one minute or one year — 60% of net gain or loss is treated as long-term capital gain or loss, and 40% as short-term. For a top-bracket earner, that blends to roughly a 26.8% effective rate on trading gains, versus up to 37% if every gain were treated as short-term.
• Mark-to-market at year end. Any open §1256 position on December 31 is treated as sold at fair market value on that date. The gain or loss is recognized in the current year, and the position's basis is reset for the next year.

Do Kalshi contracts qualify?

Unsettled. The IRS has not issued specific guidance on event contracts. Robinhood, which offers event contracts through exchanges including KalshiEX LLC, says so explicitly in its help centre: "The IRS hasn't issued specific guidance on the tax implications of trading event contracts." Kalshi has not been verified to treat or report its contracts as §1256 contracts, it does not issue a 1099 for event-contract profits, and practitioners disagree. Some tax professionals argue for §1256 treatment on two pillars:

1. Kalshi is a qualified board or exchange (specifically, a CFTC Designated Contract Market).
2. The contracts are cash-settled, margined under the DCM's risk model, and subject to the mark-to-market rules for regulated futures.

The IRS has not issued a published ruling confirming this treatment for event contracts specifically. A tax professional may conclude that your contracts are better characterized as ordinary capital assets under §1234A instead. Because no Kalshi form reports a treatment for you to follow, get a written opinion from a CPA or tax attorney before filing on either basis.

60/40 math — a worked example

Suppose you realize $25,000 in net Kalshi gains in 2026, all from trades held less than 30 days. You are in the 35% federal marginal bracket and live in a no-income-tax state.

• If §1256 does not apply: $25,000 × 35% = $8,750 federal tax.
• If §1256 applies: 60% × $25,000 × 20% (long-term rate at this income level) + 40% × $25,000 × 35% = $3,000 + $3,500 = $6,500. A $2,250 savings — a 26% reduction — purely from the favorable character treatment.

Net Investment Income Tax (3.8%) may add an extra layer if your modified AGI exceeds the $200K/$250K threshold .

Short-term vs long-term treatment

If your Kalshi contracts are not treated as §1256 contracts — the IRS has not issued specific guidance either way — the most common alternative position is ordinary capital gain/loss treatment under §1222. That is a position to take with a tax professional, not a rule the IRS has confirmed:

• Short-term capital gain / loss — contract held one year or less. Taxed at ordinary income rates (10%–37% for 2026).
• Long-term capital gain / loss — contract held more than one year. Taxed at preferential rates: 0%, 15%, or 20% depending on taxable income.

Most Kalshi contracts settle in days or weeks. Almost all non-§1256 activity on Kalshi would therefore be short-term. That is the other reason the §1256 60/40 split matters: without it, nearly every profitable Kalshi trade would be taxed as ordinary income.

Loss deductions and carrybacks

Not every year will be profitable. Here is how Kalshi losses work depending on treatment:

Section 1256 net losses

If Section 1256 applies, net §1256 losses enjoy a unique carryback election under IRC §1256(c)(3). You may elect to carry the net §1256 loss back up to three tax years to offset prior §1256 gains, filing IRS Form 1045 (Application for Tentative Refund). Any unused loss then carries forward under normal capital-loss rules.

Ordinary capital losses

Under the general capital-loss rules, net capital losses offset net capital gains each year. If your net loss across all capital assets (not just Kalshi) exceeds your net gains, up to $3,000 per year ($1,500 if married filing separately) can be deducted against ordinary income on Form 1040, line 7. Any remainder carries forward indefinitely until used.

Wash sale rule

The wash sale rule under §1091 disallows a loss where you buy a substantially identical security within 30 days before or after the loss sale. §1256 contracts are generally not subject to the wash sale rule because of the mark-to-market regime. Ordinary-treatment event contracts could arguably fall within it, but whether a later Kalshi contract on a different resolution date counts as "substantially identical" is not settled. Conservative practice: avoid rapid rebuys of the same contract series across a realized-loss trade.

Filing: Form 6781, Form 8949, Schedule 1

Kalshi does not issue a 1099 for event-contract profits, so your numbers start from its profit-and-loss statement. If a tax professional concludes that Section 1256 applies, here is the mechanical flow of numbers on your 2026 return:

1. Download the Kalshi profit-and-loss statement. It is under Account → Tax Info, updated monthly, calculated on a FIFO basis and including fees. Your net result for the year is the starting number.
2. Enter on Form 6781, Part I. Line 1 captures the net §1256 gain/loss. Line 5 applies the 60/40 split: 60% to line 8 (long-term) and 40% to line 9 (short-term).
3. Carry totals to Schedule D. Line 8 of Form 6781 flows to Schedule D, line 11 (long-term). Line 9 flows to Schedule D, line 4 (short-term).
4. Report Kalshi 1099-MISC income (if any) on Schedule 1, line 8. Use the "Other income" write-in for "Prediction-market promotional income, Kalshi 1099-MISC." This flows to Form 1040, line 8.
5. If you received a 1099-INT for the interest Kalshi pays on cash and open positions, report on Schedule B and flow to Form 1040, line 2b.

If you and your tax professional instead treat the results as ordinary capital gains (not §1256), skip Form 6781 and instead list each contract — or use a summary attached to the return — on Form 8949. Form 8949 totals then flow to Schedule D in the normal way.

Because there is no 1099 for event-contract profits, there is no Kalshi trading form for tax software (TurboTax Premier, H&R Block, FreeTaxUSA) to import — you enter the figures from the Kalshi profit-and-loss statement manually.

State-level notes

Most states tax capital gains as part of state ordinary income, typically without a preferential long-term rate. That means even if the federal 60/40 rule gives you favorable federal treatment, your state may tax the full gain at its flat or progressive rate. A few state-level observations:

• No state income tax: Florida, Texas, Nevada, Wyoming, South Dakota, Alaska, and Tennessee impose no individual state income tax on Kalshi gains. Tennessee's Hall income tax was repealed for tax periods beginning on January 1, 2021, or later.
• New Hampshire: The Interest and Dividends Tax was repealed for taxable periods beginning after December 31, 2024, and New Hampshire does not tax W-2 wages. Confirm how trading gains are treated with the New Hampshire Department of Revenue Administration before filing.
• Washington: No individual income tax, but a 7% excise tax on long-term capital gains (assets held more than one year) has applied since 2022, plus an additional 2.9% on the portion above $1,000,000 from January 1, 2025 (Washington Department of Revenue). Short-term gains fall outside it. How Washington treats the 60% long-term portion of §1256 gains is not settled in current published guidance — confirm with a Washington CPA.
• California: California has no lower rate for capital gains; all capital gains are taxed as ordinary income, at rates up to 13.3% (12.3% top bracket plus the 1% Behavioral Health Services Tax on taxable income over $1 million, per the 2025 Form 540 instructions).
• New York: The top rate is 10.9%, on New York taxable income over $25,000,000 (2025 IT-201 instructions).
• Massachusetts: Short-term capital gains are taxed at 8.5%, and for tax year 2026 a 4% surtax applies to income exceeding $1,107,750 (Massachusetts DOR). We did not find Massachusetts guidance on whether it follows the federal §1256 60/40 character — confirm with a Massachusetts CPA.
• Pennsylvania: Taxes income at a flat 3.07%. Gains are taxed at that same rate: Pennsylvania has no preferential capital-gains rate and no long-term/short-term distinction, and its Personal Income Tax Guide says §1256 mark-to-market gains and losses are reported as Schedule D transactions for Pennsylvania purposes. So Pennsylvania does tax §1256 gains, and the 60/40 split gives no Pennsylvania rate benefit.

Rates and thresholds as published for tax years 2025–2026; check your state's current instructions.

How to minimize your compliance burden

1. Start from the Kalshi profit-and-loss statement. Kalshi issues no 1099 for event-contract profits, but its monthly statement (Account → Tax Info) is already calculated on a FIFO basis and includes fees, so you start from a ready-made record rather than raw trade history.
2. Plan year-end open positions. If Section 1256 applies, mark-to-market means every open December 31 position creates a recognized gain or loss. If you are sitting on large unrealized gains on a low-income year, that year-end recognition may actually be desirable. If you are at a marginal-rate cliff, consider closing or sizing down before year end.
3. Use the §1256 loss carryback electively, if §1256 applies. If 2026 is a net loss year and you had §1256 gains in 2023–2025, file Form 1045 to claim a refund against those prior gains.
4. Keep the Kalshi profit-and-loss statements. With no 1099 for event-contract profits, the statement is your main record if your return is ever questioned.
5. Hire a CPA who knows §1256. Many general practitioners have never filed Form 6781. If you have more than ~$5,000 of annual Kalshi activity, the CPA fee for someone who understands regulated futures will pay for itself in correct treatment.

Kalshi taxes, summarized

Kalshi does not issue a 1099 for event-contract profits, so you self-report your trading results. What it does provide is a monthly profit-and-loss statement, calculated on a FIFO basis and including fees, which gives you a ready-made starting record. Whether Section 1256 60/40 treatment applies is unsettled: the IRS has not issued specific guidance on event contracts, and Kalshi has not been verified to treat or report its contracts as §1256 contracts.

On tax reporting, Kalshi is not ahead of every rival. PredictIt issues Form 1099 to US traders with $600 or more of net profit in a calendar year. Robinhood does not issue a 1099 for event-contract trades and does not report them to the IRS; it provides an annual event-contract statement, which it says is not a substitute tax form. Polymarket US's participant agreement covers electronic delivery of tax forms including Form 1099-B, but Polymarket has not said whether one is issued for event-contract profits.